For multinational companies, the retention of key executives is critical to business success. Even in current economic conditions, companies are competing globally for the best talent. The departure of an executive can be a serious setback for business continuity and performance, and more so if he or she joins a competitor. Companies are therefore increasingly prepared to invest highly in keeping executives "on board" through their pay packages.
However, remuneration as a retention tool needs to be carefully balanced against shareholders' interests. Executive pay lies at the heart of US and European concerns about recent cases of corporate mismanagement. Escalating pay levels and high-profile pay issues, be it in relation to transaction bonuses or ongoing remuneration have prompted unprecedented shareholder attention. The experiences at GlaxoSmithKline and Mannesmann, for instance, have shown this very clearly, and the general consensus is that executive pay needs to be more carefully structured.
Against this backdrop, this article (the first of a two-part feature) analyses:
General regulatory, legal, tax and other considerations for companies designing an executive pay package. In a multinational company, the structure of pay packages for local executives is likely to depend upon home country considerations such as: corporate governance rules; shareholder approval requirements; board responsibilities; tax and social security rules; and contractual issues.
How to design a pay package to balance retention and performance needs. When designing a package, it is important to: consider the retention needs for executives or a particular executive; identify corporate and individual objectives; set appropriate targets for executives; find an appropriate balance between retention and performance needs; and address any financial disadvantages arising from expatriate assignments.
A number of different types of benefits can be used to balance retention and performance needs. These include: share incentive arrangements; bonuses; pension provision; and other benefits such as salary increases and benefits in kind.
Close speedreadFor multinational companies, the retention of key executives is critical to business success. Even in current economic conditions, companies are competing globally for the best talent. The departure of an executive can be a serious setback for business continuity and performance, and more so if he or she joins a competitor. Companies are therefore increasingly prepared to invest highly in keeping executives "on board" through their pay packages.
However, remuneration as a retention tool needs to be carefully balanced against shareholders' interests. Executive pay lies at the heart of US and European concerns about recent cases of corporate mismanagement. Escalating pay levels and high-profile pay issues, be it in relation to transaction bonuses or ongoing remuneration have prompted unprecedented shareholder attention. The experiences at GlaxoSmithKline and Mannesmann, for instance, have shown this very clearly, and the general consensus is that executive pay needs to be more carefully structured.
Against this backdrop, this article analyses:
General regulatory, legal, tax and other considerations for companies designing an executive pay package.
How to design a pay package to balance retention and performance needs.
The second part of this feature will examine the retention effect of contractual protections that may apply in the event of the departure of an executive or a change of control.
In a multinational company, the structure of pay packages for local executives is likely to depend upon home country considerations such as:
Corporate governance rules.
Shareholder approval requirements.
Board responsibilities.
Tax and social security rules.
Contractual issues.
Corporate governance rules, setting out regulators' and shareholders' expectations on executive pay, are having a significant impact on how companies design executive pay packages. Fresh scrutiny of executive pay has increased regulation in the UK and the US, and led to new guidelines in countries including France, Germany and The Netherlands (with draft guidelines expected in Belgium in June) (see also Executive compensation disclosure requirements: the German, UK and US (www.practicallaw.com/A26310)). These advise on the structure of executive pay, and are increasingly conveying the message that executive pay should be linked to corporate and individual performance, in addition to strengthening disclosure obligations.
While the rules do not generally have legal effect, they can be highly influential in shareholder voting decisions (see Shareholder approval requirements below). They are aimed at listed companies but are increasingly viewed as best practice by unlisted companies. The German and Dutch corporate governance codes and Association of British Insurers (ABI) guidelines, for example, recommend that unlisted companies observe their provisions.
Prior shareholder approval may be required for elements of pay. Corporate governance rules, particularly in the US, have focused on disclosure to allow shareholders sufficient information, and indirect control over executive pay. However, new measures are allowing shareholders to vote and have more direct control, for example:
New York Stock Exchange (NYSE) and NASDAQ rules issued in summer 2003 require all equity incentive plans and material modifications (subject to certain exceptions) to be approved by shareholders.
The Dutch corporate governance code requires shareholder "adoption" of remuneration policy, and any material change in it, and of any share plan.
The remuneration report of a UK company (listed on an European Economic Area (EEA) exchange, or admitted to dealing on the NYSE or NASDAQ) must be put to a shareholder vote at the annual general meeting (The Directors' Remuneration Report Regulations 2002). This must include information on individual directors' remuneration. The vote is only advisory and is non-binding, but negative votes and abstentions are being used to express dissatisfaction over executive pay. (Following this lead, legislation is also pending in Australia to introduce a non-advisory shareholder vote on directors' and senior executives' pay.)
Shareholder approval requirements in respect of pay (in particular share-based payment) already apply in the US and the UK and in EU countries including Belgium, France, Italy and Spain. Effective communication with shareholders in formulating executive pay packages is important to avoid surprises. Shareholders must be consulted about the structure and justification of pay packages, particularly where elements of these are contentious from a shareholder perspective.
The negotiation of appropriate reward packages is primarily the responsibility of boards of directors and remuneration committees. Directors in the US, EU countries and Australia owe duties to act in the best interests of their company and shareholders (generally more stringent for those of listed companies), and should bear these duties in mind when formulating pay packages.
There have been a number of high profile cases in the US in which large remuneration packages were reportedly paid to a CEO and/or to other senior officers of US businesses. The most publicised example recently has been the US$138 million of deferred compensation paid to Richard Grasso, the former chairman of the NYSE. Investigations by regulators and derivative lawsuits by shareholders are also pending in the US against a number of companies and other entities accused of overpaying their executives. The private lawsuits typically assert that directors breached their fiduciary obligations to shareholders by either not being involved at all in the process which led to the "excessive" compensation being paid, or being only so minimally involved that they breached the duty of care imposed on them as fiduciaries.
Many US companies have consequently reviewed their corporate governance standards, and some have expanded their compensation committees and required CEO-related compensation to be approved by a company's full board of directors.
Different national rules on the tax treatment of cash, benefits in kind, share-based arrangements, pension and other forms of pay should be reviewed. These may vary considerably, particularly for share-based benefits and pensions. Where possible, the package should be tax-efficient for the executive and the company. Favourable share incentive and pension plans, enabling reduction of income tax and social security liability or deferral of payment, are available in a number of countries (see Designing a pay package below).
The impact of personal income tax rates on higher income should be considered. In Belgium, for instance, there is a maximum rate of 50% on income over EUR30,210 (about US$38,261), in Spain 45% on income over EUR45,000 (about US$56,448), in The Netherlands 52% on income over EUR50,652 (about US$63,657) and in France 48.09% on income over EUR47,932 (about US$60,216). An executive in these countries may prefer to accept lower base pay and cash benefits in exchange for longer-term, more tax-efficient options. In Spain, for example, an executive may choose to defer pay so that it is treated as long-term income (that is, income with a generation period of at least two years) and benefit from tax reductions. In the US, executive pay packages are designed where possible to convert earned income otherwise taxed at ordinary income tax rates into more favourably taxed capital gains rates, usually by awarding equity incentives in lieu of cash incentives.
Companies will be concerned as to the availability of a corporate tax deduction for contributions to benefit plans where possible:
In most countries, a local subsidiary should be able to obtain a deduction in respect of the cost of share benefits provided it bears the cost, or reimburses the parent company in accordance with a written agreement. In the US there is a US$1 million cap on deductibility by a public company of remuneration paid to its CEO and four other most highly compensated executive officers (section 162(m), Internal Revenue Code), unless remuneration in excess of US$1 million is performance-based and, among other requirements, shareholder-approved. A portion of the pay packages for these individuals in excess of US$1 million (which does not satisfy the performance-based requirement) is therefore often deferred to a date following termination of employment to preserve the corporate tax deduction.
In many countries, employer contributions to pension plans which qualify for tax concessions under relevant legislation should also be deductible, subject to limits. However, stricter rules apply on the deductibility of employer contributions to non-qualifying pension plans. In the UK, there are proposals by the UK Government (see box:Executive pension provision: UK reform proposals) to remove the deduction currently allowed for employer contributions to funded unapproved arrangements (but to defer the deduction until pension benefits are paid).
Social security can be a significant additional cost for companies, particularly on the value of share-based benefits. In Belgium and France, for instance, employer social security contributions are at the rate of 35% and 40 to 45% respectively of an employee's (uncapped) gross compensation (employee contributions are 13% and 20 to 25% respectively).
An executive pay package will determine the financial compensation the executive may claim on termination of employment (unless otherwise agreed). A major shareholder concern has become the situation where an executive leaves, either voluntarily or at the request of a board, after a short or unsuccessful appointment, with a significant financial reward (see Contractual protections: Severance payments in the second part of this feature).
Companies must consider the terms, triggers and potential costs of various exit scenarios at the outset, in particular, the executive as a "good leaver" or "bad leaver" or on a change of control. Where possible, appropriate protections must be included in the executive's service contract and other documentation. This needs to be balanced against the need to recruit, retain and incentivise key executives and to monitor their performance. From a retention viewpoint, potential severance packages should also not have the undesired effect of encouraging good executives to leave.
A number of different types of benefits can be used to balance retention and performance needs. These include:
Share incentive arrangements.
Bonuses.
Pension provision.
Other benefits such as salary increases and benefits in kind.
(See Checklist: designing a pay package and box: Performance and retention features of a pay package for general issues to be considered.)
Share incentive plans enable executives to become shareholders in their business, thereby encouraging them to add value, while at the same time providing a retention hook through vesting and holding conditions. They have been a popular means of rewarding UK and US executives since the 1980s. Historically US companies have tied a large proportion of pay to equity, largely in the form of share options, and the use of performance conditions has been unusual. The level of equity reward in the UK has been lower, principally due to the influence of UK institutional shareholders over the design and operation of plans, the prevalence of performance conditions and more limited tax breaks.
There are many different types of share incentive plans used for executives, but those most commonly used are:
Share option plans.Under a typical share option plan, an executive is granted an option to acquire shares at a price fixed at the date of grant (usually the market value of the underlying shares at that date). The option becomes exercisable (that is, "vests") after a specified period, subject to the executive remaining in employment (and sometimes the satisfaction of predetermined performance conditions - though this has not been market practice outside the UK). The executive therefore benefits from any increase in share price between the date of grant and date of exercise.
Long-term incentive plans (LTIPs).LTIPs can be designed in many different ways. In the UK, they are commonly "performance share plans" under which an executive is granted a right to acquire shares (usually at no cost) after a specified period, subject to the executive remaining in employment (and usually the satisfaction of predetermined performance conditions). In the US, they are commonly "restricted stock plans" under which an executive is granted shares (usually at no cost) up-front, which are acquired unconditionally after a specified period, subject to the executive remaining in employment (or sometimes the satisfaction of performance conditions). In each case, the executive benefits from any increase in share price.
There has been an increased use of LTIPs in both the US and the UK in the last year. The use of LTIPs is also becoming more widespread in other EU countries (where share option plans have been the preferred reward vehicle) and Australia. However, the choice of plan depends on each company's requirements, and many companies are operating option plans and LTIPs in tandem (together with other plans) to afford themselves maximum flexibility.
(See boxes: Options or share awards? and Share incentive plans: design and operational issues, for more detail on these types of share incentive plans.)
Other share incentive arrangements used in the US, some EU countries (such as Germany, Italy, The Netherlands, Spain and the UK) and Australia, aimed at retaining key executives, include:
Deferred bonus plans. An executive is permitted or required to defer a proportion of annual bonus to buy shares. After a specified period and subject to remaining in employment, the executive receives the outstanding proportion of bonus in shares. Almost 60% of UK FTSE 100 companies now operate some form of bonus deferral plan.
Share matching plans.Typically, an executive is permitted or required to use his or her own money (usually part of the annual bonus) to buy shares. Subject to retaining these shares for a specified period and remaining in employment (and usually the satisfaction of predetermined performance conditions), the executive is awarded additional "matching" shares. The ratio is often 1:1, but different ratios may be used.
Share appreciation rights (SARs). An executive is granted a right to receive, after a specified period, an amount equal to the increase in share price between the date the SAR is granted and the date of exercise, subject to the executive remaining in employment (and usually the satisfaction of predetermined performance conditions). The executive therefore participates in any increase in the market value of the shares without owning shares. Because of adverse US accounting consequences (relative to options), SARs have not been used in the US on a significant basis. However the trend may change if option expensing (that is, a requirement for the fair value of options to be recognised as an expense to corporate earnings) is introduced.
Share retention policies. An executive is required to build shareholdings in a company over a specified period. UK corporate governance rules provide that directors should be encouraged to retain shares received for a further period after vesting or exercise. This is becoming more common in the UK (but not in the US) where almost half of FTSE 100 companies apply such a policy (either just to shares obtained from incentive plans or also to other shareholdings). Where disclosed, the required shareholdings can be up to four times salary, over a specified period of up to five years.
Bonuses are typically used to incentivise executives on a short-term (annual) basis and may be contractual or (as has been common in certain sectors such as financial services) discretionary. Bonuses may be a short-term solution to retention needs. A potential for large cash bonuses poses the risk for a company that the executive will wait until payment date and then resign. However, bonus plans are commonly being structured to encourage retention through mandatory deferral of a portion of bonus (see Share incentive arrangements above). Key points are:
Guaranteed bonuses may be appropriate for new executives in the first year of employment but may encounter shareholder resistance unless strictly justifiable. In the US, guaranteed bonuses are frequently set at a level well below the likely bonus payable.
To balance retention and performance needs, contractual bonuses should otherwise be dependent on pre-determined performance conditions, generally individual and/or corporate, with a requirement that the executive remain in employment (and not under notice) in order to receive payment (though see Contractual protections: Benefits in the second part of this feature).
An upper limit or "cap" on bonus entitlement should be considered. This is a recommendation made for UK-listed companies in UK corporate governance rules. The average bonus cap in UK FTSE 100 companies in 2003, which has doubled in the last four years, was 100% of base salary.
In the case of a discretionary bonus, it should be clearly specified whether the entitlement or level of bonus, or both, are discretionary. A discretionary bonus may not act as an incentive unless the factors relevant to the exercise of the discretion are clearly stated. However, this increases the risk of a challenge where the discretion is not exercised in accordance with those factors. In some countries, including the UK, Germany, The Netherlands, Spain and Australia, an employer is subject to certain standards of reasonableness as to how discretion may be exercised.
Bonuses payable on a change of control are common in the US (usually based on the higher of the then current target bonus or most recent bonus paid or awarded). Their retention power is questionable as, unless carefully drafted, an executive may be tempted to "take the money and run". In the UK, institutional shareholders disapprove of these types of payment if they are simply a reward for effecting a transaction, and shareholder approval is required for any material ex-gratia payment. (See also Contractual protections: change of control in the second part of this feature.)
Pension provision encourages retention as it enables an executive to build post-retirement savings based on years of service, often with favourable tax consequences. Unlike other benefit plans, there is minimal link to performance, only the requirement that an executive remains in employment to be an active member. Pension (that is, unfunded pension benefits in excess of the company's broad-based funded pension plan) or "deferred compensation" arrangements are a particularly integral part of US packages. However, in some countries such as Italy and France, the state pension (together with additional provision under collective agreements for executives) has tended to provide adequate retirement income for executives, and private "top-up" provisions have been unusual. This may change in the light of national reforms to promote private provision and alleviate overburdened state systems.
Employer-sponsored plans in the EU and the US broadly fall into two categories:
"Defined benefit plans" under which a pension is a specified amount, usually related to service and salary at the retirement date. In the UK and the US, there has been a trend away from defined benefit provision in recent years, and many plans have been closed to new joiners. Contributing factors include the volatility of the stock market, proposed UK and international accounting rules for the immediate recognition of actuarial gains and losses and higher administration costs.
"Defined contribution plans" under which a pension is dependent on the contributions paid into the plan and their investment return (and annuity rates where, as typically happens in the UK, annuities are bought).
In the UK and the US, tax-approved or "qualified" plans offer favourable tax benefits. These are subject to limits, in particular a cap on the earnings which may be taken into account of GB£99,000 (about US$124,186) in the UK (not applicable to pre-1989 plan joiners) and US$205,000 in the US. Unapproved or "non-qualified" plans are typically used to supplement benefits under these plans but offer only limited tax benefits. In the US, a key benefit is the ability for the executive to defer taxation on otherwise taxable income until the pension is payable (that is, during retirement) when he or she may be in a lower tax band. In order to gain tax-favoured treatment in the US, non-qualified plans must remain unfunded until benefits become payable. (See also box: Executive pension provision: UK reform proposals.)
Other benefits that can be used as a retention tool include:
Salary increases. Salary may be subject to a fixed annual increase, dependent on performance conditions or, more commonly, a discretionary increase on an annual review by the board (in which case similar restrictions on the exercise of discretion may apply as for bonuses). Bonus and share award potential and pension obligations are often calculated by reference to salary, and so the impact of any increase on an overall pay package should be considered.
Benefits-in-kind. Benefits likely to encourage retention include long-service awards and sabbaticals. Other benefits commonly provided to executives include company cars or car allowance, private health insurance, long-term disability insurance and life insurance. These may be used to promote retention through linking the level or type of benefit (for example, the model of car or level of car allowance) to seniority. Loans to directors by US SEC-reporting companies are prohibited (section 402, Sarbanes-Oxley Act 2002) (see also Sarbanes-Oxley anti-loan provisions: the impact in Europe (www.practicallaw.com/A29045)). Loans by companies to directors are also prohibited (subject to certain other exceptions) in other countries including France and the UK. In some countries, such as Australia, flexible benefit arrangements are commonly used to enable executives to choose the form of their package (whether in cash or benefits-in-kind) and therefore plan it tax effectively.
When designing executive pay packages it is advisable to:
Consider the retention needs for executives or a particular executive. A company's retention needs for executives may vary, depending on, for example, its competitive position, whether it is a young or mature business, its financial circumstances or whether it is anticipating a change of control. Similarly, they may vary according to whether an individual executive is a long-standing performing board member or a newcomer or whether there are planned successions.
Identify corporate and individual objectives.Corporate objectives, both long-term and short-term, should be identified. This will involve agreeing business objectives both at group level and regional or local level, and these should take into account objectives on an international basis. Long-term objectives will be relevant in designing long-term incentives (such as share incentive plans) and short-term objectives in designing short-term incentives (such as annual bonuses). An executive's individual performance objectives, and their interrelation with corporate objectives, should also be identified.
Set appropriate targets for executives. Targets should be clear, relevant and stretching (taking account of corporate governance recommendations). However, to incentivise an executive, they should also be achievable, based on measures that the executive can influence. It may, for instance, be appropriate, in the case of parent board executives who are in a position to affect share price performance, to use targets linked to share price growth. In the case of local executives, however, targets might be linked to the performance of the business for which they are responsible.
Find an appropriate balance between retention and performance needs. In some circumstances, it may be justifiable for a pay package to favour retention, for example, where there is an immediate threat from expanding competitors recruiting for key executive positions. However, a package too heavily weighted in favour of performance may disincentivise executives. In terms of pay elements, a careful balance of fixed and variable pay elements, long and short-term incentives and cash and benefits-in-kind is more likely to serve as an effective retention tool. (See also box: Performance and retention features of a pay package.)
Address any financial disadvantages arising from expatriate assignments. Issues could include adverse consequences under benefit plans, such as pension plans, where an executive does not spend enough time in one country for benefits to vest or where splitting benefits between plans reduces their overall value. (This is an issue which the European Commission is seeking to address at EU level.) Tax implications also require careful consideration, in particular the risk of double or higher taxation, and the impact on share benefits.Companies may want to keep the executive "whole", so far as possible, in addition to offering relocation assistance.
Revised proposals published by the UK Government in December 2003 (Simplifying the taxation of pensions: the Government's proposals (see www.inlandrevenue.gov.uk/pbr2003/simplifying-pensions.pdf)) will, if implemented, have a significant impact on executive pension provision.These propose replacing the earnings cap (see main text: Pension provision) with:
A GB£1.4 million (about US$2.64 million) individual lifetime limit on the value of pension benefits provided by tax-approved plans;
A charge of 25% on excess benefits above the lifetime limit; and
An annual limit on the accrual of pension benefits of GB£200,000 (about US$377,000).
They also propose changing the tax position of unapproved plans. This is likely to mean that funded unapproved plans will no longer be attractive. Focus will shift to unfunded plans and in particular to establishing arrangements to give the executive security by giving a charge over corporate assets. UK executives with benefits close to or exceeding the lifetime limit should consider how best to protect these, and companies should review the structure of pension provision going forward, including the possibility of providing alternative forms of pay.
The main arguments for and against share option plans and long-term incentive plans (LTIPs) are:
Share option plans
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LTIPs
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The following issues should be considered when designing a share incentive plan:
Award frequency and level. Current practice in EU countries and the US is to make annual awards. This has the advantage that awards will vest each year, subject to performance conditions, encouraging the executive to remain with the company and produce annual improvements in results. Awards are often based on a multiple of salary and will vary according to job level. In 2003, the median grant multiple for options in the UK FTSE 350 companies was around 2.5 times salary, with the majority of companies maintaining the Association of British Insurers recommended multiple for LTIPs of 1 times salary. Award levels in other EU countries have tended to be lower (with those in countries such as Germany and The Netherlands higher than in countries such as Spain) and in the US, the multiple varies by industry.
Performance conditions. The use of performance conditions has been most prevalent in UK plans.They are also used in countries including Germany, Italy and Australia. There is likely to be increased use of performance conditions in the US and other EU jurisdictions in response to shareholder and regulator pressure. The Dutch corporate governance code, for example, now advocates the use of performance conditions. Widely used measures include total shareholder return relative to a peer group of comparable companies (more commonly used in the UK than the US) and earnings per share growth.
In the US, it has been market practice for companies to impose pre-grant rather than pre-vesting performance conditions in option plans (pre-vesting conditions attract unfavourable accounting treatment in the US). This means that the option grant is dependent on satisfying pre-grant performance conditions, with exercise simply subject to continued employment for a specified period but not any further target. UK institutional shareholder advice is that pre-grant performance conditions may only be acceptable in highly exceptional circumstances, and in particular where companies can demonstrate that it is necessary to conform to international practice.
Vesting and holding periods. A key consideration is the period after which executives become entitled to exercise options or receive shares unconditionally under the plan (that is, the vesting and/or holding period). Where vesting is performance-based, this will be linked to the performance period. Under plans operated by EU and Australian companies, options usually become exercisable in full after the relevant period (cliff vesting) (usually three years). UK institutional shareholders encourage the use of performance periods longer than three years and deferred vesting schedules. Common US practice, on the other hand, is for options to vest in tranches from the first anniversary of grant on an annual (or occasionally monthly or quarterly) basis.
Vesting periods under LTIPs may be longer. The Dutch corporate governance code requires that free shares be retained for at least five years (or until the end of employment, if sooner). In the US, there has traditionally been three to five year cliff vesting of restricted stock, but companies are now moving towards ratable vesting (that is, vesting in equal tranches on each anniversary of grant). Some performance-based vesting is also starting to occur in the US. Under UK LTIPs, however, share awards usually vest after a three-year period, linked to the performance period.
In the UK, listed companies are increasingly requiring directors to hold shares for a further period following vesting or option exercise (see main text: Share incentive arrangements:Share retention policies).
Tax.In most countries, employees granted options are taxed on exercise on the spread (that is, the difference between the fair market value of the shares on exercise and the exercise price). However, in some countries, the taxable event may be on grant (for example, in Belgium or The Netherlands (in the case of unconditional options)) or vesting (for example, on an option becoming unconditional in The Netherlands).
In respect of share awards, the taxable amount is generally the market value of the shares, but the taxable event varies according to different national rules and how the plan is structured. In respect of performance shares, it is usually on vesting. However, restricted shares may attract tax on grant (for example in France, Germany, Spain and, in certain circumstances, the UK).
Nevertheless, there are tax-planning opportunities for executives. In particular:
Tax-favoured plans are available in many countries, for example, France, Ireland, Italy, Spain, the UK and the US. These plans can be used as a foundation layer for executive awards, with "top-up" benefits being granted under unapproved plans.
Various tax concessions are available. In The Netherlands, for example, if options and share awards are granted or made unconditionally, they are taxed up-front but any subsequent gain is tax-free, provided that options are not exercised within three years of grant. In the case of an unconditional option, or an option which becomes unconditional, an employee can elect to defer taxation from vesting until exercise. In Belgium, the taxable value of options on grant can be reduced from 15% to 7.5% provided an employee agrees not to exercise them within three years and certain other conditions are met. There are also reductions in the taxable value of newly issued shares and existing (listed) shares of 20% and 16.7% respectively, subject to strict conditions (including minimum holding periods of five years and two years respectively). Any subsequent gain is tax-free. In Australia, if shares are held for at least 12 months prior to sale, 50% of the gain may be excluded from capital gains tax.
Sylvie Watts is a partner and Felicity Gemson is an international professional support lawyer in Allen & Overy’s Global Benefits Group. The authors would like to thank other members of the group, in particular Henry Morgenbesser, a partner in the New York office, for their comments on this article.
